Cooperatives and Gas
Distribution Companies in Ohio
Robert E. Burns, Esq.
Retired Research Specialist
The National Regulatory Research Institute @ The Ohio State University
burns.7@osu.edu
Note: The opinions of the author are his own and, although based on previous research at
The Ohio State University, do not reflect the views or positions of OSU, NRRI, SERC,
CESE, the OSU Extension, or the OSU Alumni Association.
Cooperatives and Gas
Distribution Companies
in Ohio
• Who can sell natural gas in Ohio?
• To sell natural gas in Ohio, one must
either be a public utility registered/certified
with the Public Utility Commission of Ohio
(PUCO), a marketer registered/certified
with the PUCO, or an exempted entity.
Cooperatives and Gas
Distribution Companies
in Ohio
• The advantage of purchasing from a public utility
is the bundle of consumer rights that come from
commission approved tariffs and commission
regulations
• Foremost among these rights are the rights that
flow out of the utility obligation to serve
• A utility cannot terminate and abandon service
with approval of the PUCO.
• The special problem of an economic breach of
contract.
Cooperatives and Gas
Distribution Companies
in Ohio
• End users can also buy natural gas from
marketers who are registered/certified with the
PUCO.
– Greater flexibility on negotiating prices, terms, and
conditions
– They sell the commodity of natural gas
– The local distribution company delivers the gas and
still has an obligation to serve and can act as a
provider of last resort in case the marketer fails to
perform or the contract is terminated
•
Cooperatives and Gas
Distribution Companies
in
Ohio
Cooperatives and Municipal utilities can also sell gas to
end users
• Ohio Revised Code section 4905(A)(2) defines a
cooperative as: A public utility, other than a telephone
company, that is owned and operated exclusively by and
solely for the utility's customers, including any consumer
or group of consumers purchasing, delivering, storing, or
transporting, or seeking to purchase, deliver, store, or
transport, natural gas exclusively by and solely for the
consumer's or consumers' own intended use as the end
user or end users and not for profit;
• Ohio Revised Code section 4905(A)(3) defines a
municipal utility as: A public utility that is owned or
operated by any municipal corporation;
Cooperative and Gas
Distribution Companies
in Ohio
• For municipal utilities, the governing principle is
political accountability
• There is no requirement in Ohio for a
cooperative utility to operate in accordance with
the Rochdale cooperative principles. You need
to be especially cautious about underlying
governance documents.
• Make certain that the cooperative really is a
cooperative. Your protection is operation
according to the cooperative principles.
• See http://communitymarket.org/wpcontent/uploads/2010/04/rochdale.pdf
Other Exempt Entities
• The Ohio Revised Code section 4905.03(E) defines a
natural gas public utility as “A natural gas company, when engaged
in the business of supplying natural gas for lighting, power, or
heating purposes to consumers within this state. Notwithstanding
the above, neither the delivery nor sale of Ohio-produced natural
gas or Ohio-produced raw natural gas liquids by a producer or
gatherer under a public utilities commission-ordered exemption,
adopted before, as to producers, or after, as to producers or
gatherers, January 1, 1996, or the delivery or sale of Ohio-produced
natural gas or Ohio-produced raw natural gas liquids by a producer
or gatherer of Ohio-produced natural gas or Ohio-produced raw
natural gas liquids, either to a lessor under an oil and gas lease of
the land on which the producer's drilling unit is located, or the
grantor incident to a right-of-way or easement to the producer or
gatherer, shall cause the producer or gatherer to be a natural gas
company for the purposes of this section. “
Other Exempt Entities
• Specifically, Substitute S.B. 315 created
(or re-created) several exempt entities that can sell gas
to end users.
• Producers can sell Ohio-produced natural gas or Ohioproduced raw natural gas liquids to a lessor under the
lease under which the producer’s drilling unit is located
or grantors of rights-of-way or easements.
• Gathers can sell Ohio-produced natural gas or raw
natural gas liquids to grantors incident to rights-of-way or
easements
• Also PUCO exemptions
Other Exempt Entities
• For other exempt entities, the
governing principle is contract law. Period
end. Remedies are according to contract
law.
• Again, ask key questions.
• See Dale Arnold’s presentation.
• The problem of economic breach.